Volume 9, No. 10


1999 S&P 500 Stock Compensation:  The Fluff Grows, Part II:  Most discussions of stock compensation disclosures provided by FASB Statement No. 123 focus on the incomplete performance picture provided by earnings when the value of stock compensation is omitted. Little is noted, however, about the number of options given - yet this should be of interest to investors and analysts. The number of options outstanding can have implications about future ownership of a firm - and for whose benefit a firm is being run. How much can investors be "crowded out" by management and employees if options are exercised? How much dilution might become present in earnings per share if options turn "in-the-money"? Another issue frequently overlooked in the common discourse on options - do the incentives they are supposed to provide actually bring about shareholder wealth? How much tax benefit do they provide? Some answers are put forth in this report.

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